Thank God For The Emergency Fund

There is no way I could or would be taking this medical leave if it weren’t for having my Emergency Fund (EF). Without the EF I would have tried to work, be making horrible mistakes, my performance would be suffering, my sick days would be sky high, and by now I would have been either on probation or fired. This was a situation where it was best I was honest, and take myself out before doing irreparable harm. My employer even shared with me that they had been questioning as far back as last November and December if it was appropriate that I had been working.

To make this medical leave work, I try to keep my finances simple – yet at the same time, I do need to keep some funds segregated, if only to keep them from becoming co-mingled.

Financial Accounts – Liquid Assets

Currently I have two checking accounts. “Old Checking” and “New Checking” – and in a future post, I’ll explain why this is so. I also have three money market accounts. One account is where I keep my deposits given to me from the tenant’s of a rental unit I own. I also keep in this account added funds to cover “emergencies” – such as needed funds if I should have to evict a tenant, clean and change the locks – as well as two to three months of “cushion” money equal to the monthly carrying costs (mortgage, HOA, utilities) in the event the unit sits empty between tenants. Every month I deposit a little money into this account to increase the “cushion” for future maintenance and repairs.

“Life Tossed Me a Lemon” EF Funds

The second money market account is where I keep the “Life Tossed Me a Lemon” Emergency Funds. This account has $5,000 for general – like when my car went on the fritz a few months ago – it was a $1,100 bill to my mechanic.

The third account includes are the funds earmarked as my “six months of earnings and salary replacement” should I not be working. In reality, these funds are usually kept in a variety of investment vehicles and CDs – but given my current situation and market volatility, it was best to have the funds consolidated into this account for the time being.

Why I Call it an Earnings Replacement Fund

I’ve heard many people refer to this type of an account as their “X months of living expenses” funds. However, it is my honest opinion that the first month or two of whatever catastrophic event (illness, termination, layoffs, resignation) that created the situation necessary to be using these funds, most people don’t curb their spending enough to live within what their revised budgeted amount should be. So, I figure it best to anticipate my spending as I always have for the first month or two as I adjust. Six months of take home salary replacement is $18,000

Current Financial Picture – Net Worth IQ Report

As of today, I have $29,165.23 of liquid and available cash in the accounts described in this post. I have $71,000 in retirement funds which include traditional and Roth IRAs, plus two 401(k)s. Also in the positive column, I own my own vehicle (2003 Volkswagen Jetta with 40,328 miles) and have a ton of beautiful expensive jewelry (that is a long story). The value on my condos are based upon the tax assessment – not a comp or internet appraisal.

On the debt side, I have $14,000 in student loans and the mortgages on my condos (the primary residence and rental unit). Because I’m thinking of selling the condo I live in and moving into the rental unit (more about that in a future post), I have been buying furniture and new light fixtures and other items to finalize the decorating and remodel of my condo. When I get the credit card bill (0% interest for 9 months), I’ll update the debts column.

Experiment: Budgeting

Over the years my finances and financial health have mirrored my physical health – ups and downs. It was only as recent as 2001 I had virtually no retirement and a net worth of negative $15,000. In a future post, I’ll share more about my financial past and how I got to where I am today. In the meantime, I’m starting an experiment – YNAB (You Need A Budget from www.youneedabudget.com) has a free 10 day on-line course to help people start and establish a budget. I’ve been very loose with my budgeting process (only at home, never at work), so I’m going to give it a shot.

I’m also doing this as a “self test” to see where I am with the morphine and how it is affecting me. Remember last week’s Excel test? This will be more of the same. I know there has been no improvement on my math skills – simple equations I was able to calculate in my head before I can no longer do – and it is frustrating me!